Wednesday, August 25, 2010

Reuters has published an exclusive report that they have a document circulated among DW's creditors which states that:

Total DW debt is some US$39.9 billion instead of the mid US$20 billions.

Though there is an apparent US$11 billion non recourse debt at Istithmar subsidiaries and US$2 billion at Infinity. These amounts are important because they will affect the net proceeds from the sales of those assets. Debt at the subsidiaries will have to be either assumed by the buyers or repaid by the seller (Istithmar).

DW warned that if it sold its assets quickly it could only raise US$10.4 billion. It's a safe bet that DW is being conservative as it doesn't want to give the lenders incentive to push for a quick sale.

Rather it needs 5 to 8 years to realize the assets at higher prices - the midpoint of which is US$17.6 billion. The highpoint of which is US$19.4 billion.

Heretofore strategic and ring fenced assets are now on the table: DP, JAFZA, Barneys, Atlantis Hotel, etc. Though one might question whether this is more a negotiating tactic. It's hard to imagine the Emirate parting with these assets. So the hope may be that a recovery in markets will lead to higher values recognized on other assets. Or that bankers' and investors' ADD will kick in and Dubai World will be able to refinance after five or so years. Either case obviating the need to part with the "crown jewels". And, thus, any sale would be an absolute last resort.

In an attempt to get banks to sign on to the rescheduling, DW is offering a signing bonus / consent fee.

Quite a remarkable turnaround.

But with roughly US$40 billion worth of debt and US$20 billion from asset sales, there is quite a "financing gap" to fill. Even more so, when one considers the fact that as the prize assets are sold, DW's right to their earnings and cashflow will end as well. Is the gap to be funded by the Emirate? If so, quite an expensive admission ticket to a relatively short ride on the "leveraged assets express".

Anyone out there who would like to share any creditor documents with me can contact me using the Contact Form.